Japan's Nikkei drops 1% on Uniqlo owner tumble, Wall Street slide

The Nikkei lost 0.97% to 39,451.85 as of the close, and earlier dipped to the lowest since March 18 at 39,217.04.

Fast Retailing, which is the most heavily-weighted stock in the by a wide margin, lost 3.34% to be the biggest drag, contributing 154 basis points of the Nikkei's total 387 point decline.

The stock tumbled from a record high reached earlier in the week after the company announced late Tuesday its first year-on-year sales decline at domestic Uniqlo outlets for three months.

Big tech names like chip-testing equipment maker Advantest dropped 2.14%, while Nintendo lost more than 4%. Artificial intelligence-focused startup investor SoftBank Group slid 1.24%.

Tech shares underperform when borrowing costs rise, and U.S. long-term Treasury yields jumped to the highest since November at more than 4.4% overnight.

The broader and less tech-weighted Topix index slipped 0.29%, with an index of growth stocks tumbling 0.8% while value shares added 0.2%.

The Nikkei has also succumbed to profit taking at the start of Japan's new this month, said Shoki Omori, chief Japan desk strategist at Mizuho Securities.

Japan's stock hit an all-time high of 41,087.75 on March 22, after the Bank of Japan (BOJ) raised interest rates for the first time since 2007 but kept a dovish stance on further tightening.

"I would say there's going to be dip buying and the Nikkei could test 41,000 again (this month), unless U.S. yields keep going higher and tech stocks keep underperforming," Omori said.

"I don't think the Nikkei will go below 37,500," he added. "For the BOJ, keeping easy financial conditions should be the way to support when external factors are pushing down equities with force."